Financial Analysis - Sara Lee Corp
Sara Lee Corp
Sara Lee operates as a global manufacturer and marketer of brand-name packaged foods and household products. Their products are distributed in grocery stores, drug stores, and food-service outlets. In February 2005, the firm embarked on mission to centralize and streamline its organization. Several less profitable business segments and brands were divested. Although Sara Lee owns well-known brands such as Sara Lee, Hillshire Farms, and Jimmy Dean, its products are segmented, making it difficult to achieve pricing power. Sara Lee is also feeling the pressure of rising commodity costs and changes in consumer trends. Many industry analysts are skeptical as to whether the restructuring initiative and strategy shift will give way to positive results and market growth. In an attempt to determine the current and future state of Sara Lee’s economic environment the cash flow statement and bankruptcy prediction model will be reviewed as well as a fundamental, traditional, and technical analysis performed. The purpose of this report and its findings will be used to determine if the company is worthy of receiving funding from lending institutions and if their stock should be invested in and if so when.
A trend analysis is typically used in predicting future stock movements, it is also useful to analyze the earnings trends and compare these results to cash from operating activities.
Trend Analysis:
Significant business divesture explains the reduction in sales revenue between 2005 & 2006; however the severe reduction in free cash flow raises concern. Cash is king and a lack there of causes liquidity concern and questions the ability of the company to remain operational. In an attempt to explain this cash limiting turn of events, the cash flow statement needs to be analyzed.
Cash Flow Analysis
SARA LEE CORP
Statement of Cash Flows
PERIOD ENDING 30-Jun-07 1-Jul-06 2-Jul-05
Net Income 504,000 555,000 719,000
Operating
Sara Lee operates as a global manufacturer and marketer of brand-name packaged foods and household products. Their products are distributed in grocery stores, drug stores, and food-service outlets. In February 2005, the firm embarked on mission to centralize and streamline its organization. Several less profitable business segments and brands were divested. Although Sara Lee owns well-known brands such as Sara Lee, Hillshire Farms, and Jimmy Dean, its products are segmented, making it difficult to achieve pricing power. Sara Lee is also feeling the pressure of rising commodity costs and changes in consumer trends. Many industry analysts are skeptical as to whether the restructuring initiative and strategy shift will give way to positive results and market growth. In an attempt to determine the current and future state of Sara Lee’s economic environment the cash flow statement and bankruptcy prediction model will be reviewed as well as a fundamental, traditional, and technical analysis performed. The purpose of this report and its findings will be used to determine if the company is worthy of receiving funding from lending institutions and if their stock should be invested in and if so when.
A trend analysis is typically used in predicting future stock movements, it is also useful to analyze the earnings trends and compare these results to cash from operating activities.
Trend Analysis:
Significant business divesture explains the reduction in sales revenue between 2005 & 2006; however the severe reduction in free cash flow raises concern. Cash is king and a lack there of causes liquidity concern and questions the ability of the company to remain operational. In an attempt to explain this cash limiting turn of events, the cash flow statement needs to be analyzed.
Cash Flow Analysis
SARA LEE CORP
Statement of Cash Flows
PERIOD ENDING 30-Jun-07 1-Jul-06 2-Jul-05
Net Income 504,000 555,000 719,000
Operating